Blockchain usually gets associated with cryptocurrency, but it’s much more than that. It’s worth remembering that at its core, blockchain is a technology protocol that can handle all types of data and contracts. This means that blockchain has use cases in a lot of existing industries where tracking information and executing contracts are necessary. It even has use cases in the world’s oldest industry: food production. The blockchain agriculture transition is upon us.
If you’ve ever been to a farm, you know they’re complicated ecosystems with a lot of moving parts, careful timing, and seasonal financing structures. However, after the food leaves a farm, it becomes part of a wide-reaching supply chain with a lot of parties. Buyers, sellers, distributors, and grocery chains all want to know where the food is along its journey. You also probably want to know where your food has been before you serve it on your dinner table.
The trend toward blockchain agriculture promises to make each step of growing and distributing food simpler. It will offer all parties involved a single source of truth for the agriculture supply chain. In this article, we’ll cover four key ways that blockchain is changing agriculture.
A huge challenge for the agriculture industry is tracking and paying for delivery of produce. Usually, this takes the form of a big multinational corporation placing or receiving an order for thousands of tons of a given produce. In most cases today, this process relies on a locally-based third party that coordinates the delivery of goods. The seller would have an agent that makes sure the goods are delivered, and the buyer would have an agent to inspect the delivery and recommend payment.
Using the blockchain, this system of regional sales agents can be simplified to a single distributed ledger. Commodity buyers can deal directly with the supplier and transmit funds immediately. This speeds up what was once a paper-based process that could take weeks to settle a payment. In addition, the companies save on agent fees and the farmer who grew the crops can receive a larger share of the proceeds from the sale.
The Louis Dreyfus Company recently conducted the first blockchain agriculture commodity trade. They sold 60,000 tons of American soybeans to the Chinese government. According to those with knowledge of the deal, using the blockchain reduced the total time for logistics by 80%. The entire transaction only took a week.
Moreover, these delivery deals often involve complex agreements with conditions of delivery and payment. They’re perfect candidates for smart contracts management. As smart contracts become more widely used in agriculture, it’s possible a farmer could sell produce directly to a restaurant or even an individual without the need for middlemen distributors.
Product Origins & Supply Chain
How do you know the organic produce you purchased is really organic?
Last year, the U.S. Inspector General found that potentially millions of pounds of fake organic produce are entering American supermarkets every year. This isn’t just a problem for consumers. It also cheapens the efforts of farmers who are producing real organic produce.
Consequently, there has been rising interest in systems that can verify the authenticity of a product’s supply chain. Blockchain is an excellent choice for this application. Farms could use blockchain to add verified organic products to the ledger. Then, consumers could use a mobile app to check the history of a piece of produce in the store in real time.
With blockchain tracking, if a supplier claims that coffee beans come from an ethical farm in Kenya, anyone can easily verify that claim. Blockchain agriculture would allow you to trace the beans from the farm to the coffee shop directly from your phone while waiting in line.
From a regulatory perspective, this makes the USDA and FDA’s jobs a lot easier as well. If there’s a contamination of the food supply, it becomes much easier to track where it came from and recall the associated produce. As a result, regulators can isolate foodborne illnesses very quickly.
Decentralizing Power of Multinational Companies
Multinational corporations dominate the current agriculture industry. They are often the largest buyers on the market, so they can set prices and tell farmers what to grow in a given season. However, blockchain agriculture could make small enterprises and community-sponsored farming more prevalent.
There are currently small-scale community-sponsored agriculture co-ops around the country. The idea is you buy a farm share and then the farmer delivers produce directly to you throughout the season. The benefits of this approach go two ways. First, the farmers receive funding at the beginning of the season, allowing them to invest in the farm and stabilize their finances throughout the year. Second, consumers get to know their farmers and benefit from cheap, seasonal, locally-grown produce.
Blockchain agriculture can solve some of the governance, distribution, and shareholding challenges of operating a community-sponsored agriculture initiative. With tokenized shareholding and smart contracts-based distribution, community-sponsored agriculture could scale much more effectively, connecting farmers to consumers directly. This whole community-supported agriculture transition could even be automated, with ownerless farmshares around the world.
Currently, the markets for purchasing commodities are controlled by large companies and aren’t transparent. As a result, pricing can fluctuate wildly depending on demand, weather, regional production levels, and relationships with intermediaries. Blockchain agriculture could make pricing of bulk commodities more transparent for farmers and buyers.
A blockchain-based market would allow buyers and sellers to compare their current negotiations against information about similar recent transactions. Farmers around the world can determine what their harvest is worth and carry out the sale in real time.
Blockchain Agriculture Could Change How We Think About Food
The more transparent food production becomes, the more information consumers will have to make smart food decisions. Blockchain agriculture could make food cheaper, but it will also make it easier to track where our food is coming from. Blockchain could be the key to making real, organic, locally-sourced produce affordable and available to everyone.
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